In with the old, out with the new

Text of an article published in Crossbow, the Bow Group magazine.

An infectious pandemic of hand-wringing has broken out across the globe. Mostly afflicting politicians of a leftist persuasion, symptoms include incessant talk of a ‘new capitalism’ or a sinister-sounding ‘new world order’.

Conspiracy theorists must be having a ball. They have been warning for years of a new world order, comprised of power-hungry politicians and corporate leaders, forming an ominous world government to control us all. What makes their theories unlikely is that the notion of Gordon Brown ruling the world is more laughable than terrible.

The more sober reality, as touted by many a policymaker and opinion-former, is that in the long run, the rise of the East will trump everything the West does, leading to a fundamental shift in the global balance of power from Washington to Beijing and from London to Bombay. Already, we have witnessed the unprecedented visit of the US Secretary of State to the Chinese government to implore the Chinese to continue investing in American debt; effectively a plea from a debtor to a creditor to keep the money flowing. We have had several thousands of jobs ‘offshored’ to India, as ambitious young people from that country compete ferociously for employment.

The global recession has slowed all this down, but the process continues. Chinese growth is slightly depressed, but it’s still growth. And the long-term bets seem still to be on countries like India to emerge as economic superpowers. See, for example, the recent G20 gathering, which only a few years previously was the G7. Certainly, many American Republicans would have us believe that the election of Obama heralds the end of American hegemony, and they may yet be proved correct.

But is it too early to sound the death-knell of the West? After all, what made Britain and the US great was freedom – the liberty to innovate, create wealth and form businesses. As Milton Friedman pointed out, there was nowhere in history a greater advancement of the condition of the ordinary man than in the US in the 19th century.

It might be simplistic to say that freedom is the only guarantor of long-term national greatness. But history seems to indicate that the freer a people are from the interfering hand of their government, the better they are able to build prosperity, and it is prosperity, rather than military strength, that underpins a nation’s power.

In other words, as long as we in Britain regain the liberty that is our birthright and as long as Americans can maintain their constitutional freedoms, there is no reason to believe that a permanent decline is inevitable. And conversely, if China does not permit its people the liberty they deserve, it may see the fruits of its growth squandered by upheaval, and its stability upset by the kind of political turmoil that Britain suffered in the Victorian era. India, meanwhile, enjoys a delicately balanced democracy, but one that has the potential to fracture badly along lines of caste, class and religion. Its own business practices are still badly held back by corruption and bureaucratic interfering.

There are other factors at work stopping the New Eastern Order from taking shape. A study from 2004 indicated that China’s population may simply get old before it gets rich. The by-product of an authoritarian one-child-per-family policy may yet be a disastrous demographic time-bomb, whereby there is eventually a shortage of productive young workers. If this happens it would be the law of unintended consequences writ large – an anti-liberty government policy that leads, decades later, to a youth crunch.

Conversely, while population ageing is also a major issue in the West, we are likely, according to the US Census Bureau, to retain a healthy percentage of young people well into the 21st century. This is not the result of a specific policy but of simply the freedom to reproduce and raise families.

The key, it would seem, is to react to the economic crisis with restraint, prudence and an eye on the future, rather than knee-jerk regulation and the kind of government control that will merely stifle innovation and growth. The lesson of history is that free people are more than capable of organising their own affairs and producing their own triumphs of wealth and technological advancement, while people constrained by the dead hand of the state can only achieve what their masters permit them to.

A free China and a well-functioning India are things we should all hope for, as they will add to global prosperity. But as long they remain distant dreams, we in the West should at least appreciate how lucky we are to enjoy freedom, and fight to retain it. It will ensure our continued survival and preserve an imperfect but valuable Old World Order.

California, here we come

Text of a piece posted at TheYoungConservative.

There was a time when the Cameroon project to reinvent the Conservative party (and ultimately Britain) was organised around an existing blueprint. That blueprint was California: socially liberal, entrepreneurial, environmentally friendly and with Scandinavian-style efficient public services. If Cameron could not bring the golden weather to Britain, he could at least import the optimism and feel-good factor.

Today, priorities have shifted. An incoming Tory administration would be less focused on California dreaming than on jolting Britain awake to the reality of our awful fiscal situation. This is as well, for the blueprint state in question is now going bust, and has its own horrible reality to deal with. With a budget deficit of over $24bn, the reign of Arnold Schwarzenegger looks set to end in misery. A law requiring the budget to be balanced will force savage cuts in public services and potentially tax rises, though these are being vetoed by Republican politicians. Tens of thousands of prisoners are set to be released. The welfare state faces a massive cutback. School’s out for longer than summer, as teachers will be fired.

While Democrats blame the collapse on the wider economic crisis, it is plain to see that California’s mess is a disaster of left-wing making. Taxes in the state have systematically hammered the rich, many of whom have simply fled to other states in the US, taking jobs with them. A Brownite debt-fuelled spending splurge in the boom years led to Californian bonds having their ratings slashed, meaning investors could get better yields elsewhere.

The world’s eighth-largest economy is now groaning under unserviceable debt and mindlessly high taxes. It is not difficult to draw a parallel with the US as a whole. The Obama administration has already committed to spending truly staggering amounts of money on various projects from bailing out bankrupt automobile manufacturers to fighting ‘climate change’. Added to this are a raft of tax increases and a vast intended mass of regulation. It is clear that Barack Obama is determined to leave office with an expanded State, higher taxes and a record national debt.

If the US goes the way of California, the implications for the world economy are terrifying. But as far as we Britons are concerned, we must at least stop our country from emulating the Golden State in its present form. There is much to hope for in California: a truly entrepreneurial culture, a tough justice system and world-class universities to name three examples. If the Tories really want to bring California to Britain, they should bring the things that made it worth living in in the first place, not the things that have destroyed it.

Stop spending our future

Produced a few months ago, this video puts the case against government spending to ease the economic crisis.

Government interference in home education

Text of a piece posted (in edited form) at TheYoungConservative.

When a government says it is not going to take away your freedom, you can bet your last penny that that is precisely what it is setting out to do. Just as Labour ministers sneered at accusations that they were creating a semi-totalitarian state with their sweeping powers for police and the executive, so they are now taking great pains to reassure parents who school their children at home that proposals to ‘better regulate’ this sphere of human activity are not an attack on those parents.

A review to be published soon will no doubt call for closer scrutiny of children schooled outside schools. The pretext for this is that such children are open to abuse, an accusation that is a terrible slur on parents who choose to home educate, often because their children have been bullied or are disabled. Certainly, the State should take action against abusers, and those who have been found guilty of such evil should be severely punished. But as with the ‘anti-terror’ laws, we are moving once again from a presumption of innocence to a presumption of guilt, so that all home educators will be under suspicion.

Now we should not be so naive as to assume that this attack on the fundamental right to educate your children away from the State, spearheaded by the great Ed Balls, will be conducted openly. Rather, it will be done in an incremental manner, with each successive concession representing a step towards the loss of parental freedom. This is why it is so essential to fight the government at every step, no matter how trivial it may seem now. Governments given an inch will not hesitate to take a mile, especially where matters of children’s education is concerned.

So what motivation could a Labour government, or the State in general, have for attacking home education? For the answer, one needs to look at the extraordinary effectiveness of home schooling. Research has shown that home educated children tend to have better social skills and to perform as well as, if not better than, their school-educated peers in examinations. This is especially true of children from disadvantaged backgrounds. The numbers speak for themselves: the population of home schooled children has risen rapidly in the UK over the past decade, to well over 50,000 today.

Parents who pull their children out of school are exercising the ultimate protest against the British school system, which has since the 1960s been the subject of a gigantic and failed experiment in social engineering. The collapse of standards and discipline, and the replacement of academic selection with selection via postcode or daddy’s wallet, has massively damaged British education. Add to this the incessant targets and bureaucratic interference of New Labour, plus the rise of politically correct curricula that deny British history and promote underage sex, and it is no wonder home schooling is rising in popularity.

In short, home education is an embarassment for the government. It represents the part of society that its bureaucracy-obsessed managers cannot wield control or influence over. Just as the left has always viewed ambitious working class people with suspicion, so it dislikes parents who do not need its magnanimity or ideologically-driven programmes. And to add insult to injury, there is no evidence that home schooled children are worse off; in fact the opposite.

It was therefore only a matter of time before Labour sought to stick its interfering nose into the lives of parents who bravely flout the system by educating at home. It is imperative for liberty and for the continued success of thousands of children, that home education is defended all the way. There may come a point, many decades hence, when State control over schools will be viewed as an unfortunate abberation, and parents who today home school their children will be lauded as being ahead of their time.

Asleep at the wheel

Text of an article originally published at Queue Magazine.

The common wisdom is settled. Bankers made a terrible hash of the financial system. Greed, recklessness and immaturity triumphed over prudence, caution and responsibility. Never before, have so many despised so few.

If the common wisdom had a track record of getting it right, it would be as well for us to take heed and follow its various prescriptions. But alas, the signs are not good. Just consider that a mere five years ago the common wisdom was also firmly settled, but on a different set of errant assumptions – that property prices would rise forever, that inflation was a thing of the past and that the cycle of boom and bust was ancient history.

As the New York Times columnist David Brooks has noted, there appears to be more going on here than a bunch of laissez-faire regulators asleep at the wheel.One needs only look at the phenomenon of the ‘Greenspan put’ – the US Federal Reserve Bank’s policy of averting economic crisis by lowering real interest rates and pumping cash into the economy – to realise that the great and good people of government and policymaking had their fingerprints all over this one.

From the 1987 Black Monday crash, through the first episode of unpleasantness with Saddam in Kuwait, to the 1997 Thai meltdown to the 2001 double-impact of the dotcom slump and 9/11, Alan Greenspan abandoned his previously staunch monetarist credentials in order to turn on the water-cannon of credit instead. Put plainly, this means that for over a decade, the USA’s central bank flooded the world with cheap money.

It all has to go somewhere. Because the markets were awash with dollar-denominated debt, added to by the explosion in sterling that took place under the auspices of Gordon Brown from around 2000 onwards, asset prices rose massively. Ordinary consumers discovered that they could take out multiple mortgages and use perpetually rising property values to finance profligate lifestyles, while private equity firms used truckloads of leverage (debt) to buy healthy companies and strip them of their cash flows. As long as the bubble kept expanding, prosperity was there for the taking – provided one was a reckless speculator and not a prudent saver. Never before, have so many owed so much.

If the story of 1990s America was one of the world’s most powerful republics placating its plebeians with iPods and shoes, the story of China is very different. China, the world’s oldest empire and one of its most magnificent, treats economics as a matter of state, to be decided upon by the mandarins in their ivory towers. Ever since Deng Xiao Peng issued his edict of 1978 – ‘to get rich is glorious’ – the Chinese government has been busy turning that country into a giant exporter of goods, selling cheap products to the West on razor-thin profit margins. The profits from this exercise have mostly been invested in US dollars, so that China has played the role of a giant department store to America’s consumers: buy our products and we’ll extend you credit at the same time.

The result is a gigantic symbiotic relationship turned sour. Cheap goods from the East kept inflation low in the West, while cheap credit in the West provided a safe haven for the profits from China’s mercantilist growth. Getting one’s head round this problem is a not inconsiderable challenge, and when the billions-upon-billions scale of the macroeconomic factors is realised, the diagnosis is made harder to explain.

It is far easier to blame bankers. They play the same role that witches played in the Middle Ages – they personify problems beyond the control of individual humans and therefore become an outlet for frustration. Sir Fred Goodwin, grinning inanely as he collects his undeserved pension, becomes the vampire of nightmare, sucking blood from the economy as he gorges himself. But the truth is that Goodwin was a bit player in a drama that involved the whole world, and was written by Governments and Central Banks.

As with all bubbles, the free market got this one. The market has not failed in recent months. It is working exactly as it should, to reverse an insane expansion of credit and bring prices crashing back to earth. It is restoring some sense of balance to the system of money and credit. It is a painful process but harsh medicine is sometimes the only thing that works.

Thomas Hobbes, in his Leviathan, famously said that the life of man is ‘nasty, brutish and short’. So it is with recessions; they are indeed nasty and brutish. But we must let them run their course, so that at the very least, they are short.

A call for boldness

Text of an article originally published at Queue Magazine.

If one were superstitious, the timing would be positively fortuitous. Alistair Darling’s next budget is to fall almost exactly a century after one of David Lloyd George’s most controversial and hard-fought bills.

The year was 1909. Three years previously, the Liberal party of Sir Henry Campbell-Bannerman had swept to power in a landslide election victory, embarrassing the Conservative party with its success. By 1909 the Liberal administration, boasting such giants as Asquith, Churchill and Lloyd George, had joined battle with a recalcitrant and reactionary upper chamber, dominated by Tory old lags that ultimately rejected the government’s radical plans to redistribute wealth by taxing the rich. By exercising its prerogative to veto a budget, a step unprecedented since the 17^th century, the Lords induced their own destruction: 1911 saw the Parliament Acts, which broke the power of the House of Lords forever.

Today, the government faces no similar uphill struggle. The Lords, half-reformed and stuffed with appointees, tends not to act as the ‘watchdog of the constitution’ as Lloyd George wished it would do – though it would be churlish to deny the upper chamber’s achievement in, for example, rejecting the 42 days’ detention legislation.

Why, then, ask many commentators on the political left, does Alistair Darling not take a leaf from the book of the Welsh wizard, Lloyd George, who introduced in 1909 for the first time, old-age pensions, higher taxes on higher incomes and increased inheritance taxes? Similarly, conservative commentators extol the virtues of spending cuts. What unifies both sides is that they call for boldness, but know full well that they will get blandness.

For a start, the difference between then and now is stark. Then, Britain was in a relatively sound fiscal condition. Taxes were generally low. The size of Government was small. As historian A.J.P. Taylor has written: “(u)ntil August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman”.

The truth is that, for better or worse, the size and scope of Government has grown inexorably since the 1909 clash between peers and people. Two world wars and many decades later, we are in Britain heavily taxed, ineffectively regulated and ruled over by what journalist Peter Oborne has referred to as the political class: a caste of homogenous ciphers a world apart from the struggling middle-class families in many of the nation’s cities.

What does this mean for this week’s budget? It means that even though the supremacy of the Commons over the Lords is unquestioned, boldness is still a rare quality among our elected leaders. What we are likely to see this week is a safety first budget, tinkering at the margins with spending cuts while scrambling to appeal to all constituencies with ‘green’ investments and perhaps a limited tax cut of some sort.

Lack of boldness is perhaps endemic to our democracy. When Labour proposed its 45 pence tax rate for higher earners, the Conservatives quickly adopted the plan, as if to dissent would be a step too far. Where does this leave voters? On foreign policy for example, the Commons is more or less unified: to exit the European Union would be beyond lunacy but to go to war in a far-flung Middle Eastern country is justified. The ascendancy and strength of the Commons has made it uniform, not diverse. Debate is stifled rather than heated.

The old Parliamentary system was not wholly democratic. But it worked reasonably well at steering the ship of state and pushing steady reform into law. This system, with its titled ministers, its First Lords of the Treasury (never ‘Prime Ministers’, until Campbell-Bannerman) and its privileged MPs who kept racehorses rather than fiddled expenses, was perhaps always destined for destruction in a modernising world. And the extension of the franchise, particularly to women, was long overdue.

Ultimately, the People’s Budget of 1909 paved the way for true democracy: a Lords that has eventually to bow to the Commons if the latter so wishes it. This, surely, is the fairest approximation of a democratic system we can get.

And yet, the principles of those heady days from 1909 to 1911 – redistribution and people power – have not delivered the promised utopia. Instead they have created a disconnected and insular political bubble that has yet to burst, and laid the foundations for a welfare state that is far advanced but inefficient and poor at rescuing the poor. As we survey the wreckage of our economy and anticipate what will probably be Darling’s last budget, we ought not to reflect upon what was gained during the twentieth century, but on what was lost.

Avoiding tax avoidance and restoring confidence to the UK

Text of an article originally published on ConservativeHome.

A Conservative Prime Minister once remarked at a party conference that he would define Conservative party policy as ‘the upholding of confidence’. The speaker was the Marquess of Salisbury, and he was speaking in 1889. Much has of course changed since then; including the Conservative party itself, but the idea of restoring and upholding confidence is still crucial, especially with regard to the current economic crisis.

Arguably the most vital task of the Conservative party in government, should it win the next election, will be to maintain investor and business confidence in the UK. Without this, the nation faces the very real and serious threat of permanent decline, as capital flies to other destinations and job creation grinds to a halt.

Bearing this is in mind, the Guardian’s latest crusade against ‘tax avoidance’ is as destructive as it is misguided. A word of caution is necessary. Nobody is accusing anybody – yet – of tax evasion, which is a crime. What is being alleged is that companies are exploiting loopholes in the law in order to pay as little tax as possible.

The Guardian is exercised over this because it has assumed that everybody has a duty to pay as much tax as possible (what is usually referred to as a ‘fair share’) to the State. The principle of private property, however, is completely ignored. If property is sacrosanct, as it should be in a sovereign democracy, then each individual or association of individuals is entitled to try and make their finances as tax-efficient as possible. This is only ‘avoidance’ if one considers, as many on the political Left do, that the redistributive affairs of State take priority over individual freedom.

Furthermore, to accuse a company – a voluntary and entirely consensual association of autonomous people – of avoiding tax is like accusing a football team of trying to score goals.

Companies are set up for the express purpose of delivering profits to their shareholders, and as such are designed to avoid any costs at all, be they taxes or otherwise.

A company cannot shoulder a tax burden in any meaningful sense because it is not a person. It will simply shift the burden somewhere else, onto human beings. Shareholders will see less profit, consumers will see higher prices and so on.

In other words it is always individuals, not faceless evil corporations, who lose out in some way. One may argue that the tax collected from these people will be put to better use than the individuals can put it to themselves. Conservatives should of course reject this argument out of hand, as it is a line of reasoning that explicitly distrusts people in favour of governments.

Companies will always seek to make profits as efficiently as possible and will look for low tax countries in which to invest. The Left, who view such countries as a nuisance, seek to use the coercive power of government to stop this from happening. Already Barack Obama has pledged to shut down tax havens. If he succeeds, this will be a straightforward victory of State muscle over individual enterprise.

There is a simple answer to all this: cut taxes. A lower and simpler tax structure attracts investment and encourages enterprise. Conservatives will be familiar with the Laffer curve, which shows that a reduction in the overall tax rate can lead to an increase in the tax take.

The argument for lower taxes is actually simpler. It is that a low tax economy is good for its own sake. The productive activities and prosperity generated benefit us all. Whether or not this leads to greater tax revenue for the State is of secondary importance.

The Institute for Fiscal Studies recently calculated that thanks to the catastrophic state of Britain’s finances £20 billion worth of fiscal tightening will be necessary to slash the national debt. This will be necessary to prevent a crisis of confidence among investors, who don’t want to be left holding the bill for a decade of disastrous economic policy.

No doubt there will be harsh measures necessary, including perhaps tax rises. But when struggling through recession, it makes no sense to unnecessarily penalise and harass business for seeking efficiency. The rational response of any company will be simply to shift its assets, investments and jobs overseas. This is a loss of confidence against which the Tory party must guard.

High taxes are on the horizon

Text of an article originally published in thelondonpaper.

‘What’s in it for me?’ The near universal reaction to the Chancellor’s budget is also the most naturally human one. Self-interest comes easily to most of us, and that is no bad thing. After all, as Adam Smith first told us, it is not from the benevolence of the baker that we get our bread but from his regard to his own interest. So it isn’t surprising when people watch the news surrounding the budget – not compelling viewing by any means – and scan it for items that affect them, hopefully positively. We can’t blame people, especially in the current economic climate, for clamouring for some cash from government. Every little helps, especially when it’s free. Except, of course, it isn’t free. Every penny spent is a penny taxed or borrowed from someone else; usually future generations. We have become so used to the idea that government exists to help us that we have come to rely on it, and have forgotten that the overall picture isn’t helped when the state takes wealth from one corner of the economy and injects it into another. The budget, of course, is for the health of the nation, and if the nation is in rude health then we all benefit. As such, we should demand tough decision-making by our policymakers. We should avoid asking for a sweetener here, a tax break there and instead shout as loud as we can that the fiscal incontinence must stop, full stop. The truth is that the money has run out. The deficit is now so huge that it’s not just higher earners who will be paying more taxes from now on, it’s all of us. This isn’t about altruism or even about the national interest. It’s about all of us, as individuals and families, having security and peace of mind. Call it long-term selfishness rather than short-term greed. And while we’re on the subject of greed, isn’t it time we called out the real greedy pigs in this sordid affair – the government? For it is our Prime Minister who is now sacrificing the country on the altar of his ego. Nobody believes the wonderland growth forecasts; nobody believes the hype. Everyone can see what the government is doing, and that’s spending our money in order to buy time, and votes, for itself. That, dear Londoners, is true selfishness; the kind that leads to perdition.